estate planning

Inheriting a House Recipe

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Fortunately, the recipe for inheriting a house can be a simple one. Of course, there are potential complications, but those belong in the alternative versions of this recipe for what to do when you inherit a house. Ingrdients for a House Inheritance Finance Recipe Taxes On an Inherited House The first thing most people think of when they inherit a house is taxes. Between politicians running scare stories to boost their election chances, newspapers and financial news sources running edge-case scenarios with big, bold, headlines for clicks, or just those horror stories your less financially literate friends repeat, it can seem like the IRS is waiting to repel agents out of helicopters onto your parents’ old house to sieze it before you can set foot inside. The reality is, you probably won’t pay taxes on an inherited house at all. Capital Gains and The Tax Basis Before you start cooking up a tax avoidance scheme for the house you inherited, you need to know how the capital gains and tax basis ingredients work. The only taxes you, your parents, or great uncle, or anyone else, would pay on a house are capital gains taxes and property taxes. Capital gains taxes …

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What Is The Difference Between UTMA and UGMA?

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How Are UTMA and UGMA Alike? UTMA and UGMA are very similar. Both are uniform code proposals adopted by the individual states. Like other uniform codes (the uniform building code is a common one, for example) these work by proposing a common framework for states to use in order to prevent a hard to use patchwork of laws in each state. The uniform code did not prevent one important variation. The UTMA or UGMA account comes under the control of the beneficiary when he reaches the age of maturity. However, that age varies from state to state. Typically, the beneficiary assumes control of the UGMA or UTMA at age 18 or 21. The UTMA and UGMA are two different uniform codes, but they are more alike than they are different. What Is UTMA? UTMA is the Uniform Transfer to Minors Act. People say, “ut-mah” when they talk about them. What Is UGMA? UGMA is the Uniform Gifts to Minors Act. People say “ug-mah” when they talk about these. Both UTMA and UGMA were created to allow adults, usually parents, to transfer assets to minors without the need to establish a special trust to enable such ownership. Both UTMA and UGMA …

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Understanding How Beneficiaries Work

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As a financial advisor, I used to review client’s paperwork when they came in for an appointment. Among many other things, I always made sure to go over was to review beneficiaries of my client’s accounts. Or, more to the point, I TRIED to review the beneficiaries on my client’s accounts. All too often, they had no idea who the beneficiaries were, or how to find out. Even worse, they often just decided to assume that they knew the beneficiaries on their accounts. Out of date beneficiaries is one of the most common financial problems people have when they start financial planning. What Are Beneficiaries When someone dies, there are a series of laws that determine exactly how your assets get dispersed among the living. These laws are long and complex. They are collectively referred to as estate law, and it is complicated enough to be an entire specialty for attorneys. The primary instrument for distributing your assets as you see fit, rather than as how the law dictates, is your will. However, there are several kinds of accounts that do not fall under this process, unless you do not properly designate your beneficiaries. In this context, a beneficiary is the …

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Using 529 Plans for Estate Planning

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Estate planning is one of those topics that seems to be widely misunderstood. First, there are different kinds of estate planning. The most necessary kind for everyone is simply having a will of some sort. It really doesn’t have to be anything fancy, especially if you don’t have a lot of assets. There are a lot of forms out there you can fill in. While that is definitely NOT the way to go if you have anything complicated or fancy, or if you have a lot of assets, they are pretty much fine for the average person. The second type of estate planning is financial estate planning, that is trying to avoid paying estate taxes. This actually applies only to a small percentage of people. Will I Have to Pay Estate Taxes? Nope. That was easy, huh? It’s a trick of semantics. Estate taxes are the only taxes that you will never have to pay. That’s because your heirs, or more specifically, your estate, actually pay estate taxes after you are dead, so you don’t pay them. Even if you inherit something, you don’t pay the taxes, the estate does, before the assets become yours, so technically, no person ever …

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Review IRA Beneficiaries

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When I was a financial planner, there were a lot of little things that came up over the years that I realized went unnoticed by the vast majority of people, no matter how well educated they were in finance and investing. Understanding, setting and updating the beneficiaries on accounts like IRAs was one of those things that slips through the cracks for many people. Of course, IRA plans aren’t the only accounts with beneficiaries on them. Be sure to check your life insurance accounts, annuities, 401k accounts, and other retirement plans to keep them up to date. Without this important part of estate planning, all your other efforts might be for nothing. Will Versus Beneficiaries One of the most important things to understand about accounts with beneficiaries, is that that accounts only become a part of your estate after your die, IF AND ONLY IF, there are no living beneficiaries assigned to the account. What that comes down to is that updating your will and changing who you are leaving what, does NOTHING to affect how your insurance or IRA account balances are distributed upon your death. Even if you specifically disinherit someone in your will, they will still get …

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